National news

NFL-less L.A.: City of Angels, sans pigskin

Millions lost with no pro football in Los Angeles, U.S.’s No. 2 market

By

RussBritt

LOS ANGELES (MarketWatch) — Take $100 million each year, and burn it.

That’s pretty much what the professional-football business is doing every year by not having a viable franchise in Los Angeles, according to Dmitry Kopylovsky, a sports-industry analyst for IBISWorld Inc. in Los Angeles.

Despite the National Football League’s phenomenal success over the last few decades — muscling out baseball to become America’s most popular sport — one major blemish for the league over the last 16 seasons has been that it hasn’t had a presence in the second-biggest U.S. media market.

In today’s world of state-of-the-art, revenue-belching venues, Kopylovsky said, a Los Angeles NFL franchise could easily generate $100 million more in revenue than one of its weaker-performing franchises, such as the Minnesota Vikings or Oakland Raiders.

“There’s no doubt in my mind, the NFL could have done better with a team in L.A.,” he commented.

“Can you imagine Target, Starbucks or General Motors not being in the second-biggest market in the country?” asked Jack Plunkett, chief executive of Houston-based market researcher Plunkett Research Ltd. “It poses a big problem.”

It’s not that Los Angeles, or the NFL, hasn’t been trying. Ever since the Rams relocated to St. Louis and the Raiders moved back to Oakland, Calif., prior to the 1995 season, both the city and the league have sought numerous times to bring NFL football back to the City of Angels.

Various proposals have come and gone. But this week, proponents contend they’ve taken a giant step forward when sports and concert marketer Anschutz Entertainment Group signed an unheard-of $700 million, 30-year naming-rights deal with Farmers Insurance for a $1 billion stadium in downtown L.A.

The deal puts in place the private financing for a new stadium — keeping public tax dollars out of the picture for an already financially struggling city and state — which Los Angeles long has wanted to lure a disgruntled NFL team from a weaker market.

Proposed is a facility in a newly revitalized part of the downtown core. An older wing of L.A.’s convention center would be torn down to make way for what would be called Farmers Field.

‘Can you imagine Target, Starbucks or General Motors not being in the second-biggest market in the country?’
Jack Plunkett, Plunkett Research

It would sit adjacent to the Staples Center, home of professional basketball’s Lakers and Clippers teams as well as hockey’s Kings. Across the street from Staples is L.A. Live, a collection of fashionable shops, restaurants and concert venues such as the Nokia Theater, site of last year’s “American Idol” finale. A new high-rise of luxury Ritz Carlton residences stands nearby.

Still, significant hurdles remain, including some that long have been stumbling blocks in the bunch of attempts to re-establish a franchise in Los Angeles.

One massive question is whether AEG’s own chief, Phillip Anschutz, is on board. The idea was hatched by his top lieutenant, company president Tim Leiweke. Prior to this week, Leiweke had been floating the idea of a downtown L.A. stadium, but has acknowledged he wasn’t sure if he had the support of his boss.

When the naming-rights deal was announced this week, Anschutz was nowhere to be seen at the press conference. It remains unclear whether he has gotten behind the proposal now that Farmers is kicking in $700 million, though many wonder how he couldn’t be supportive at this point.

“It doesn’t mean anything,” Plunkett said of Anschutz’s absence.

Next on the list is whether AEG and others can convince the city to approve construction of the facility, which would take up 1.7 million square feet. The region already is crowded, and it seems that parking would be confined mostly to multitiered structures — not exactly conducive for game-day tailgate parties.

The city of Los Angeles has been reluctant in the past to approve any NFL proposal that didn’t involve the use of its old Memorial Coliseum, though it has moderated that stance in recent years. Built in 1922, it was the centerpiece venue for the 1932 and 1984 Olympics, and remains home for the University of Southern California’s Trojans football team.

The Rams used the facility from 1946 to 1979 before that franchise moved to nearby Anaheim Stadium in Orange County, and ultimately to St. Louis. Then the Raiders fled Oakland in 1982 and used the Coliseum until the team decided to move back north.

The bugaboo has been that the city has insisted any new football team occupy the Coliseum, now a historical landmark, but it would not pay for upgrades such as luxury boxes and club seating. Al Davis, managing partner for the Raiders, tried for years to get L.A. to foot the bill for a major revamping to include those amenities, but the city balked at spending taxpayer dollars on the deal.

Over the last 15 years, proposals have surfaced to build stadiums in suburban Irwindale and Carson. There currently is a competing plan by real-estate magnate Edward P. Roski to construct a facility in what is called the City of Industry, about 25 miles east of the proposed downtown facility.

But Kopylovsky said proposals to build stadiums in outlying suburbs as opposed to a central downtown location would eat into any L.A. franchise’s revenue. Also, using an older venue wouldn’t be suited to take advantage of luxury suites and other amenities.

“To bring a new team to L.A., they can’t play at the Rose Bowl. They can’t play at the Coliseum,” the analyst elaborated. “A team in that location, right by L.A. Live and the Staples Center, locking it up over the next 30 years, that’s the kind of expenditure that it’s going to take.”

The question is, which teams would flee their current cities to take up residence in Los Angeles, if any?

A number have been mentioned, including the possibility of prodigal sons Rams and Raiders returning.

The Vikings also are considered possible refugees, particularly as the team has been pressuring Minneapolis to build a new stadium and the roof of its existing home, the Metrodome, collapsed late last year in a snowstorm. (Don’t forget that the Lakers franchise once played basketball in Minneapolis.)

Others with leases coming due are San Diego’s Chargers, the team that is closest to L.A. and developed a local fan base after the Rams and Raiders left. There also are two teams in small markets, the Jacksonville Jaguars and Buffalo Bills. Finally, the San Francisco 49ers have been mentioned, as that team has struggled to find a replacement for aging Candlestick Park.

With a state-of-the-art downtown stadium like the one AEG is proposing, any franchise that has been in a small, low-income market and moves to L.A. could instantly become an “elite” team in terms of marketability, according to Kopylovsky. He points out that the Lakers and the city’s baseball team, the Dodgers, hold that distinction in their own leagues.

Data show top-revenue generators like the Dallas Cowboys, Washington Redskins and New England Patriots make $300 million to $400 million a year, Kopylovsky said.

He averaged the revenue for those three teams from 2005 through 2009. Using those as benchmarks, Kopylovsky figures a Los Angeles team in a sparkling downtown facility could have made an average of $295 million a year during those five years. The Vikings averaged slightly less than $195 million annually in those years.

The NFL has been absent from Los Angeles for more than a decade and a half, and there seems to be little outcry in the region for a team to carry the city’s mantle.

At one point, in 2002, the NFL told the city it could have an expansion franchise if it could put a viable proposal together. That never came about, and a more aggressive effort by the city of Houston resulted in the Texans setting up shop there.

“There’s certainly a lot of outside criticism about [the fan base],” Kopylovsky remarked. “But when it comes down to spending money on a winning product, fans in L.A. will not have a problem doing that.”

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.